Thursday, January 1, 2009

Public Radio Gives Arthur Levitt Free Pass

Driving back from a Virginia Christmas with family, I heard a public radio interview with ex-SEC chair Arthur Levitt. Mr. Levitt now works for The Carlyle Group, a huge private equity underwriter (PEU). Themes included the fall financial implosion and Bernie Madoff's $50 billion Ponzi scheme.

If contrite Arthur sported a Pinocchio nose, it must've been an elephant's trunk by the time his interview ended. First, he talked about secrecy and greed. Secrecy applied to unregulated financial products like credit derivatives. America's shadow banking system suffers from a lack of transparency, including hedge funds who didn't perform due diligence regarding Bernie Madoff.

What Arthur didn't mention is his firm's greed and secrecy. The Carlyle Group expects a 30% annual return on investments and has fought efforts to improve private equity firm reporting. It's partly owned by a foreign sovereign wealth fund, even more secretive in their financial dealings.

What did the public radio reporter miss? Arthur's PEU got $153 million in TARP funding for affiliate Boston Private Financial Holdings. BPFH says it already had a strong capital position, implying it didn't need the money. The investment firm targets the high net worth marketplace. Currently, The Carlyle Group has $40 billion in cash.

Here's a possible public radio question for Arthur: Why should taxpayers invest money in BPFH when Carlyle is flush with cash? Why does the high net worth marketplace need access to loans subsidized by taxpayers? I'd like answers.

Arthur said more that stewed me. He spoke of the 1999 letter asking the SEC to investigate Bernie Madoff. I requested an investigation in early 2006. It lingers deep in a stack of unreplied letters in numerous bureaucratic arms of our federal government.

Why did the White House Lessons Learned report on Hurricane Katrina fail to mention the hospital with the highest death toll? Memorial Hospital lost 34 patients. Not mentioned were 24 deaths from LifeCare Hospitals' unit within Memorial or the 10 patients lost by Memorial's parent, Tenet Health.

The Carlyle Group purchased LifeCare just weeks before landfall. The PEU with the Pennsylvania Avenue address and deep list of insider political connections got a free pass in Frances Townsend's "robust" investigative report. A year after his brother failed to mention Tenet Health's Hospital of Death, Jeb Bush was appointed to the Tenet Board of Directors.

No questions, no answers, no responses. I'm beginning to detect a pattern.

Insider Architect of the Implosion

"I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders."--Larry Summers, Ph.D.

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The PEU Report is absolutely brilliant and has given me faith that someone out there has noticed what is going on in the world. --Ex-Bloomberg reporter

I really can't say enough how much I enjoy your commentary on PEU. You manage to dig into the details and sum it up in a way that is so succinct and entertaining.-Ex-Bloomberg reporter

When Tim Geithner, the former Treasury secretary, takes over as president of Warburg Pincus, the private-equity firm, even a high-school dropout can discern a pattern.-Another person who noticed